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Forced Entrepreneurs

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  • ISAAC HACAMO
  • KRISTOPH KLEINER

Abstract

Conventional wisdom suggests that labor market distress drives workers into temporary self‐employment, lowering entrepreneurial quality. Analyzing employment histories for 640,000 U.S. workers, we document that graduating college during a period of high unemployment does increase entry to entrepreneurship. However, compared to voluntary entrepreneurs, firms founded by forced entrepreneurs are more likely to survive, innovate, and receive venture backing. Explaining these results, we confirm that labor shocks disproportionately impact high earners, with these workers starting more successful firms. Overall, we document untapped entrepreneurial potential across the top of the income distribution and the role of recessions in reversing this missing entrepreneurship.

Suggested Citation

  • Isaac Hacamo & Kristoph Kleiner, 2022. "Forced Entrepreneurs," Journal of Finance, American Finance Association, vol. 77(1), pages 49-83, February.
    • Handle: RePEc:bla:jfinan:v:77:y:2022:i:1:p:49-83
    DOI: 10.1111/jofi.13097
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    Cited by:

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    2. Peter Levell & Matthias Parey & Aitor Irastorza-Fadrique, 2023. "Household responses to trade shocks," IFS Working Papers W23/13, Institute for Fiscal Studies.
    3. Raunak Gupta, 2024. "Untangling the nexus of entrepreneurship and unemployment: a bibliometric review," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 14(1), pages 1-15, December.
    4. Baridhi Malakar, 2024. "Essays on Responsible and Sustainable Finance," Papers 2406.12995, arXiv.org.
    5. Syed Tariq Anwar, 2023. "The sharing economy and collaborative consumption: Strategic issues and global entrepreneurial opportunities," Journal of International Entrepreneurship, Springer, vol. 21(1), pages 60-88, March.
    6. da Fonseca, João Galindo & Pannella, Pierluca, 2023. "The housing boom and selection into entrepreneurship," Labour Economics, Elsevier, vol. 85(C).
    7. Mueller, Clemens, 2023. "Non-Compete Agreements and Labor Allocation Across Product Markets," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277621, Verein für Socialpolitik / German Economic Association.
    8. Jonsson, Sara & Ouyang, Qinglin, 2023. "Effects of cultural origin on entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 308-319.

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